Bangladesh Bank (BB) has kept the monetary policy ‘almost unchanged’ for the second half of the fiscal year claiming the success implementation of the previous.
However, the central bank governor Fazle Kabir considered the limitation of private sector credit flow in the last six months while unveiled the policy statement at BB headquarter in Motijheel in the capital on Wednesday.
Central bank officials claimed the policy as ‘expansionary’ as there is a broader target in private sector credit towards industrialization and employment generation which experienced negative trend in last six months.
Banking Reform Advisor Shitangshu Kumar Sur Chowdhury, Deputy Governors Abu Hena Mohd Razee Hassan, SM Moniruzzaman and executive directors of different department of the central bank were present on the occasion.
The central bank’s crossed the target in public sector credit 13.3 percent of projected target of 8.5 while the private sector credit flow experienced negative growth.
Explaining the reason behind negative trend in private sector, Governor said there was uncertainty among mass mind to invest following the national election, however, the central bank is confident to overcome the target by end of the fiscal.
BB achieved 13.5 percent credit growth in private sector during July-December period last year which is almost 3.3 percent lower than the projected target of 16.8 percent.
Overcoming 3.3 percent gap, the central bank has to achieve almost 20 percent growth in private sector credit including new target of 16.5 percent in next five months.
BB Governor Fazle Kabior claimed that the target of around 20 percent growth is ‘achievable’ towards the gross domestic product target set by the government.
The main objective of the policy is leading the country’s economy towards government GDP target maintaining an ‘acceptance level’ of the market inflation, according to the governor.
The central bank kept the policy rates unchanged as repo rate to 6.0 percent and reverse repo rate to 4.75 percent. Overall market inflation target is 5.5 percent which was now 5.54 percent.
In his speech, Governor also hinted several new arena of foreign credit source of Belt and Road Initiative and AIIB through central bank collaboration.
“Public and private agencies will avail the funding from these foreign sources specially focusing on infrastructural development. These initiatives will also open opportunities to increase multinational credit flow into our emerging economy,” Governor Fazle Kabir added.
The central bank officials also updated about the status of banking sector in the country after the lowering interest rates in first half of the fiscal following government decision.
Declining the allegation of influence of bank owners to central bank, Governor said,” They (owners) make business by getting license from Bangladesh Bank. There is no influence from them in central bank policy till now. From us we only provide policy support to keep the economy vibrant,”
There are some 11 banks surpluses the advance deposit ratio (ADR) target of 83.5 percent although 49 banks are below the target line, according to the governor.
Regarding the recent Global Financial Intelligence (GFI) report of Deputy Governor Abu Hena Mohd Razee Hassan said the Bangladesh Financial Intelligence Unit (BFIU) has been overlooking the illegal trend of capital flight.